Nikkei slips

The Nikkei average slipped from a four-week high on Thursday on profit-taking ahead of the settlement of a futures contract and as market players turned cautious ahead of key events in Europe. Shares of Tokyo Electric Power Co tumbled after a report that the government will inject at least 1 trillion yen ($13 billion) in a de facto temporary nationalisation of the operator of the crippled Fukushima Daiichi nuclear plant.
Weaker-than-expected machinery orders data also weighed on the market, driving down shares of machine makers such as Komatsu. In Europe, a senior German official gave a downbeat assessment of prospects for agreement at an EU summit on Friday, causing investors to roll back expectations for progress in Europe's efforts to contain its debt crisis.
"Right now the Nikkei's caught in between bullish and bearish views on Europe's meeting this week," said Hiroyuki Fukunaga, CEO of Investrust. "Most people are taking profits because it's so uncertain and hardly anyone can take a long position now." The benchmark Nikkei dropped 0.7 percent to 8,664.58, slipping from a four-week high above 8,700 hit on Wednesday but above its 75-day moving average of 8,638, seen as key support. The broader Topix index shed 0.6 percent to 745.11.
Futures came under pressure from profit-taking ahead of the settlement of the December contract on Friday, as the Nikkei has entered a major resistance zone in the 8,700-8,800 area, where it traded heavily from October to early November. The bottom of the cloud on the daily Ichimoku chart also looms above the Nikkei at 8,747.
But most players want to see the outcome of the European Central Bank's policy meeting on Thursday and Friday's EU summit rather than speculating on the outcome. "This week has been like waiting for a movie to start in the cinema," said Soichiro Monji, chief strategist at Daiwa SB Investments. "My sense is that it could be like the previous EU summit on October 26, where we saw some progress but details remained sketchy, leaving uncertainty in the market."
In a positive sign, foreign investors became net buyers of Japanese shares for the first time in five weeks last week, when the Nikkei logged its biggest weekly gain in two years. Still, market players said their buying mostly represents unwinding of an underweight position on Japanese stocks to a neutral level at best. Tokyo Electric (Tepco), the most active share on the Tokyo Stock Exchange, was down 11.3 percent at 244 yen after touching a seven-week intraday low on the government capital injection report in the Mainichi newspaper.
"Tepco shares fell on fears that this could lead to dilution, although it could also reduce the risk of bankruptcy," said Hiroaki Kuramochi, general manager at Mita Securities. Tepco, which faces the prospect of massive compensation payments and clean-up costs as the crisis at the Fukushima plant rumbles on, is increasingly likely to see its liabilities exceed its assets in the next financial year ending in March 2013, the paper said. Shares of scandal-hit Olympus rose 4.4 percent after the company's board signalled plans to quit over a $1.7 billion accounting fraud. About 1.74 billion shares changed hands at the Tokyo Stock Exchange's main board, about 10 percent above its average during the last 20 days. There were about 11 decliners to every 8 advancers.